| Photo by Dylan Gillis on Unsplash
TRENTON, NJ—The New Jersey Economic Development Authority has tapped Rutgers University School of Management and Labor Relations (SMLR) to create educational and informational programming to increase the number of New Jersey businesses utilizing an Employee Stock Ownership Plan (ESOP).
An ESOP is an employee ownership model in which employees retain an interest in company shares by holding corporate stock in a trust. It provides a succession plan for business owners while building wealth for workers.
A Wealth Disparity Task Force was established through Executive Order 262 of Governor Phil Murphy. It was tasked to examine the causes of and create remedies for the longstanding wealth disparities that affect Black and Hispanic or Latino New Jerseyans with $6 million in funding for Wealth Disparity Initiatives based on the work of the Wealth Disparity Task Force. The agreement will be funded through part of that allocation.
NJEDA said the Memorandum of Understanding (MOU) between the NJEDA and Rutgers SMLR will support creating a technical assistance program. Rutgers SMLR will develop a tool to help interested New Jersey businesses determine if transitioning to an ESOP may be viable for succession planning. Additionally, Rutgers will spearhead a series of outreach initiatives to increase awareness and access to information for employees and business owners interested in considering becoming an ESOP. The programming will be led by SMLR’s Institute for the Study of Employee Ownership and Profit Sharing and its New Jersey/New York Center for Employee Ownership.
“The ESOP model has been deployed successfully by thousands of companies nationally and presents a fantastic alternative for New Jersey businesses looking to solidify their succession plans and offer a family-sustaining benefit to their employees,” said Governor Phil Murphy. “The team at Rutgers has amassed significant expertise on the deployment of ESOPs, and will be a crucial partner in raising awareness of this tremendous financial opportunity for New Jerseyans.”
NJEDA said that despite the success of ESOPs nationwide, New Jersey continues to report one of the lowest rates of employee-owned companies across the United States. New Jersey is home to 88 ESOPs, holding $64.9 billion in plan assets covering 423,429 current employees and retirees, with an average stock account for eligible current employees of $188,868.
“Employee ownership strategies save jobs and help to keep the business and the local economy going. Our research shows that when low-income workers own some or all of the companies where they work, they can also build significant wealth over time,” said Professor Bill Castellano, Executive Director of the New Jersey/New York Center for Employee Ownership. Yet, this critical succession and wealth preservation option has not yet been sufficiently communicated to underrepresented business owners. This program aims to begin to correct that.”
NJEDA CEO Tim Sullivan noted, “ESOPs offer a powerful mechanism for creating a stable transition plan for companies while also helping employee owners accumulate wealth to pass on to future generations, particularly within communities of color.
According to Sullivan, the Wealth Disparity Task Force identified an opportunity to mitigate barriers to entry into ESOPs,” releasing their potential to secure the future of businesses and their employee owners that outpaces more widely-employed forms of savings and investment.”
–With Jay Domingo/PDM
